Is Now The Time To Look At Buying Super Micro Computer, Inc. (NASDAQ:SMCI)?

Today we're going to take a look at the well-established Super Micro Computer, Inc. (NASDAQ:SMCI). The company's stock saw a significant share price rise of 58% in the past couple of months on the NASDAQGS. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today we will analyse the most recent data on Super Micro Computer’s outlook and valuation to see if the opportunity still exists.

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Is Super Micro Computer Still Cheap?

Super Micro Computer is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 24.17x is currently well-above the industry average of 18.21x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Since Super Micro Computer’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

View our latest analysis for Super Micro Computer

What kind of growth will Super Micro Computer generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to more than double over the next couple of years, the future seems bright for Super Micro Computer. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in SMCI’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe SMCI should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on SMCI for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for SMCI, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Super Micro Computer as a business, it's important to be aware of any risks it's facing. Be aware that Super Micro Computer is showing 4 warning signs in our investment analysis and 1 of those makes us a bit uncomfortable...

If you are no longer interested in Super Micro Computer, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.